Share this post

Link to post

Share on other sites

Why are Nationwide lowering their mortgage rates if we're in a rising IR environement and possible credit crunch?

Remortgaging is the biggest part of the mortgage market. This area is booming right now. They want a piece of the action. It's also lower risk and right now that is what this credit crunch is all about.

Share this post

Link to post

Share on other sites

I believe that Nationwide don't securitise their debt, so they are not affected by the debt market turmoil. If so, they should be in a position to profit from the plateau in BOE IRs.

I thought so too, perfect situation for them - they can lend their own money so the slowing world economy and corresponding drop in the expectations for future rate rises are good for them even if there is a crunch, gives them a chance to get back market share from all of these new startups who rely on the secondary debt markets.

Share this post

Link to post

Share on other sites

Why are Nationwide lowering their mortgage rates if we're in a rising IR environement and possible credit crunch?

They probably know BOE better than us and as history proves, there is always possibility of rate cut to save Brown's miracle economy as the incompetent muppets did in August 2005. Can we really trust UK interest rates to kill miracle economy? I can't however credit crunch would do the trick nicely.

Share this post

Link to post

Share on other sites

Its just marketing - in a week of market volatility when there's much press speculation that credit and mortgage lending will become tighter the good old Nationwide that likes to be different can put out the message: Nationwide Decreases Fixed Rate Mortgages from 23 August 2007

Share this post

Link to post

Share on other sites

I think it is a play for market share. Fionula Early Bird said that Nationwide aren't exposed to current problems in the market like some of their competitors because they (Nationwide) don't need to go to the wholesale market for funding. While other lenders are forced to put their rates up Nationwide can afford to drop the headline rate (and make up for it with fees) in order to gain market share and squeeze the competition.

If this ploy is too successful they might help put a competitor out of business...and that might just have wider implications.

Share this post

Link to post

Share on other sites

I think it is a play for market share. Fionula Early Bird said that Nationwide aren't exposed to current problems in the market like some of their competitors because they (Nationwide) don't need to go to the wholesale market for funding. While other lenders are forced to put their rates up Nationwide can afford to drop the headline rate (and make up for it with fees) in order to gain market share and squeeze the competition.

If this ploy is too successful they might help put a competitor out of business...and that might just have wider implications.

There must be some truth in this and getting rid of the opposition in an over subscribed market is a good reason. It is likely to be this and a publicity stunt as how many are in a position to take up these offers at this time? Still strange that they offer 95% to new buyers though. Expect the critera to be very tough though with very few being able to qualify.

Share this post

Link to post

Share on other sites

If you ask me, they're digging their own grave. There is a good reason why no one wants to buy this debt anymore. So, Nationwide thinks they can beat the market and try and eat as much of it as possible. Good luck! When Gordon's miracle economy pops, Nationwide will go under. That's all just my opinion of course.

Share this post

Link to post

Share on other sites

Why are Nationwide lowering their mortgage rates if we're in a rising IR environement and possible credit crunch?

I read a piece in the FT today. It basic argument was that some banks borrow on the interbank markets (credit crunched), many of the bigger boys dont and can thus hoover up the mortgage trade by offering lower rates.

This is just the big boys reeling them in from the riskier and more exposed banks that cant afford to offer those juicy mortgages anymore.

Share this post

Link to post

Share on other sites

Why are Nationwide lowering their mortgage rates if we're in a rising IR environement and possible credit crunch?

Swap rates are falling, that's all. When a firm like Nationwide that finances mortgages from deposits not from money market borrowing wants to offer a fixed rate, it hedges the risk by buying interest rate swaps for the fixed period - that way, it can pay a more or less floating rate to depositors and charge a fixed rate to borrowers without getting into trouble if rates change unexpectedly. Ironically, the current credit market turmoil that's made it more expensive for Northern Rock and others that fund mortgages by borrowing from 3rd parties has also reduced the chances of more base rate rises thus the price of interest rate swaps has fallen.